Comcast’s Roberts Chases NBC Channels as Investors Demand Cash

Comcast, the largest U.S. cable-television operator, is in talks with NBC Universal majority owner General Electric Co. to form a joint entertainment venture, according to people with knowledge of the discussions. Comcast would contribute as much as $6 billion plus cable channels, a fraction of the $54.1 billion Roberts offered for Walt Disney Co. in an unsolicited bid five years ago.

Investors have pressed Roberts for cash returns and don’t support a major content acquisition, according to Craig Moffett, an analyst at Sanford C. Bernstein & Co. Roberts reinstated Comcast’s dividend in 2008 after almost a decade’s hiatus and raised it by 8 percent in February. He’s negotiating a plan that wouldn’t affect the payout or stock buybacks, a person with knowledge of the talks said yesterday. The approach incorporates investor concerns without tempering his strategic ambitions.

“Brian’s focus is trying to make sure that the company is as successful and competitive as possible over a long period of time, not the next day or week or month,” Stephen Burke, Comcast’s chief operating officer, said in an interview. “He wants to create a company that has great assets that will endure.”

Roberts, 50, wasn’t available to comment, said D’Arcy Rudnay, a Comcast spokeswoman. Burke, 51, who came from Disney more than a decade ago, wouldn’t discuss the negotiations. He said at a Sept. 9 investor conference that content companies are Comcast’s first acquisition priority. The company isn’t looking to make a $50 billion purchase, he said then.

‘Really Good Businesses’

Content channels including E! Entertainment, Versus and regional sports networks “are really good businesses,” Burke said at the conference. “We wouldn’t be doing our job if we didn’t try to figure out a way to get bigger in those businesses.”

Under the plan being discussed, Philadelphia-based Comcast would own more than 50 percent of the venture, according to two people who asked not to be identified because the talks are private. GE, based in Fairfield, Connecticut, would contribute its 80 percent stake in NBC Universal and transfer $12 billion in debt, one person said.

Comcast values NBC Universal in the high $20 billion range and would contribute $4 billion to $6 billion, according to one of the people. Comcast’s cable channels may be worth as much as $6 billion, said Hale Holden, a Barclays Capital Inc. analyst in New York.

The plan hinges in part on Vivendi SA selling its 20 percent stake in NBC Universal, two people said. They stressed that an agreement isn’t assured.

The deal outline pleases Morris Mark, president of Mark Asset Management Corp., who sold Comcast stock five years ago after the Disney takeover failed. The bid for Disney, now the world’s largest media company, probably taught Roberts to avoid hostile takeovers, said Mark.

“They’re making a really attractive buy,” said Mark, who describes Roberts as a “solid, conservative businessman.”

Roberts joined the business almost 20 years after his father, Ralph founded the company in 1963 by buying a five- channel cable system in Tupelo, Mississippi. Since then, Comcast has expanded to 23.9 million cable-TV subscribers in 39 states, partly by acquiring businesses from rivals.

Brian Roberts took the top spot in 2002, after Comcast almost tripled in size with the purchase of AT&T Corp.’s cable systems for $56 billion.

Thwarting Diller

The son, a former top squash player at the University of Pennsylvania, boosted Comcast’s subscriber base after being named president in 1990.

In 1994, Roberts thwarted an attempt by InterActiveCorp CEO Barry Diller to merge shopping channel QVC with CBS, offering $2.2 billion for the part of QVC that Comcast didn’t own and buying the shopping channel in partnership with Tele- Communications Inc. the next year.

Since Roberts became CEO in November 2002, Comcast shares have declined 10 percent, adjusted for a three-for-two stock split in February 2007.

Comcast dropped $1.21, or 7.2 percent, to $15.67 on the Nasdaq Stock Market yesterday, after news of the talks with GE broke on Sept. 30. GE lost 45 cents, or 2.7 percent, to $15.97 in New York Stock Exchange composite trading.

“An acquisition of a major content studio, even if consummated at an attractive price, is most decidedly not what Comcast investors had in mind,” Moffett, who is based in New York and rates Comcast “outperform,” said in a research note yesterday.

Cash Flow

Investors who are unhappy with a possible deal are driving down the stock price, said Joel Levington, a director at Brookfield Investment Management Inc.

“Comcast has done a very good job of managing through the recession, particularly with cash-flow generation,” said Levington, who is based in New York. “Investors want to see the Comcast cash flow make its way back in the form of dividends and repurchases.”

The company declared dividends totaling $727 million in 2008, according to its annual proxy statement. Roberts lifted the dividend to 27 cents in February. The company repurchased 15.5 million shares in the second quarter at a cost of $215 million and had $3.9 billion available under its buyback authorization.

Disney Bid

In 2004, Roberts made his bid for Disney while the Burbank, California-based media company’s then-CEO, Michael Eisner, faced calls for his ouster. Roberts scrapped the plans after Comcast shares dropped 12 percent and Disney’s board rejected the offer as too low.

That hasn’t deterred Comcast from pursuing programming. Burke said last month that combining content with distribution would help fuel growth at Comcast. The cable operator’s business right now is about 95 percent distribution, where it reaps monthly subscriber fees, and 5 percent video and Internet products, he said.

Comcast spent about $6.5 billion on video programming in 2008 and about 20 percent to 25 percent of that went to NBC Universal, according to Bernstein estimates.

Roberts would also gain a bigger voice in shaping online content distribution. NBC helped create Hulu.com, a Web site that streams TV shows and movies for free. That would add diversity at Comcast, which controls about 25 percent of the U.S. cable-TV market.

“Brian recognizes that there’s a real threat to cable operators going forward because of things like the Internet and wireless,” said Porter Bibb, managing partner at New York-based Mediatech Capital Partners LLC, which advises media and technology companies. “The business that he and his family started years ago is not going to prevail for the indefinite future. Brian knows that and wants to save it.”